Move over cash: We are now living in the digital economy and credit is quickly becoming king.
It is undoubtedly one of the most essential elements that truly determine the quality of our lives. We recently caught up with serial entrepreneur Dr. Juanita Woodson to talk about building credit the right way so that it can revolutionize the life of the entrepreneur.
According to Woodson, to understand business credit, you must understand the concept of credit itself. Credit is an overall snapshot of someone’s financial trustworthiness. Credit can be enhanced or destroyed depending upon the stewarding or squandering of spending habits. These practices can reflect positively or negatively on the credit, determining a bank’s perception of one’s financial practices. Essentially, it’s how banks determine whether to extend lines of credit.
Ways that Woodson’s companies have benefited from having business credit are continually expanding. She has been able to finance the acquisition of several vehicles and establish her own car rental company. She has access to large pools of rewards points for travel through perks on business cards. She has received no limit business credit that grows and expands with her needs.
We asked Woodson to share five ways business credit can benefit small businesses:
- By separating personal and business assets, you protect the owner. The owner or manager of the business is not liable to repay the business debt, credit, or its loans. The owner is protected by the corporate veil.
- Businesses receive up to five times the amount of credit limits than that of an individual. Lending institutions understand that businesses have overhead and expenses that need to be paid. Capital which is usually used for startup can be quite costly so banks lend higher limits.
- Expansion of the business can happen quicker and with less financial stress. Many companies, when using reinvested funds, have taken several years to see growth. However, with a line of business credit, expectation of expansion becomes inevitable.
- Travel reward points on business credit cards exceeds that of personal credit. For example, American Express Business Platinum credit cards give high reward points for travel. Many employers and employees can even travel for free with the generous flight rewards.
- Lines of credit with wholesale vendors is another major benefit. You can order supplies and inventory for a deeply discounted price. Places like Sam’s Club will extend generous amounts of unsecured credit to small businesses.